Business transfers 


There will be a business transfer where, immediately after a transfer, such as a business sale, there is an identifiable economic entity that has retained its identity. This is often described as the “going concern” test. Broadly speaking, it involves examining whether whatever has changed hands on the transfer date is a recognisable business, capable of continuing to operate as a going concern, as opposed to just a collection of assets, such as land and buildings, with no intention to carry on the business. 


The economic entity need not exist separately before the transfer. TUPE will still apply if the separate business only emerges as a result of the transfer (Fairhurst Ward Abbotts Limited v Botes Building Limited [2004] IRLR 304). In addition, TUPE can still apply even if the sold business is integrated into the buyer’s business straight after the transfer. 


To decide whether a business transfer has taken place, tribunals must look at all the surrounding facts to decide what has happened, in other words, to decide whether there has been a transfer of a “going concern” to a new employer. Relevant factors can include:


• the type of business;


• the assets being transferred and whether these include goodwill, equipment or premises; 


• whether most of the employees are being taken on by the new business, and if not, why not; 


• whether customers are transferring; 


• similarities and differences between the activities carried out by the new and old business; and


• any break during which activities are suspended, and the reason for and length of that break. 


This approach was established by two leading cases in the Court of Justice of the European Union (ECJ) known as Suzen [1997] IRLR 255 and Spikjers [1986] ECR 1119.


There can still be a transfer of a business even if operations were temporarily suspended before sale (Housing Maintenance Solutions Limited v McAteer [2014] UKEAT/0440/13/LA). 


For example, in Wood v Caledonian Social Club Limited EAT/0528/09, a bar suspended operations because it lost its alcohol licence, and Mr Wood was dismissed. Even so, when the bar reopened a few weeks later under new management, Wood could claim automatically unfair dismissal in the tribunal against the new business under TUPE.


TUPE can still apply even if some of the employer’s activities were carried out unlawfully before the transfer, for example, because the employer was breaking tax laws. (Ejiofor t/a Mitchell & Co Solicitors v Sullivan [2014] UKEAT/02868/13/SM).


Where staff have been dismissed before the transfer instead of being employed by the new business, a tribunal will need to examine the reason for dismissal. Only if the main reason for dismissal is a planned business sale or service provision change will the dismissals be automatically unfair and in breach of TUPE. This is one of the main weaknesses of TUPE protection, especially in the context of business failure. It is all too easy for a new business owner to argue that employees lost their jobs before the transfer not due to the impending sale but instead because there were no funds in the insolvent business to pay their wages (a reason unrelated to the transfer). Here is a notorious illustration: